New emergency manager bill introduced in Michigan House

A new emergency manager bill has been introduced in the Michigan House of Representatives, one day after an Ingham County Circuit Court judge upheld the law Michigan's emergency financial managers are working under.

The developments come as Detroit faces the possible appointment of an emergency financial manager, with Michigan Treasurer Andy Dillon indicating this week that the state will likely begin a review the city's finances.

"While Public Act 4 was repealed by voters, financial emergencies remain in place in struggling municipalities and schools. We need to continue moving forward in addressing those emergencies, to ensure the health, safety, and welfare of citizens and children," said Michigan Department of Treasury spokesman Terry Stanton.

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A majority of voters rejected Public Act 4 of 2011, the state's broadened emergency manager law, when a referendum on the law, Proposal 1, appeared on the Nov. 6 ballot.

The replacement law was approved in a 9-5 vote with one pass on Thursday by the House Local, Intergovernmental and Regional Affairs Committee.

As of late Thursday afternoon, the House still was in session.

"I think Detroit is driving this to a great extent, and I think it's obvious that if something isn't done in Detroit, you're going to have bankruptcy, and I don't think the governor wants to see that, nor do I," Pontiac Emergency Financial Manager Lou Schimmel said.

The proposed Local Financial Stability and Choice Act would respect voter rejection of Public Act 4 by allowing for input from local officials in financially troubled communities, according to a memo from Gov. Rick Snyder's office.

The bill's provisions include a choice of four options in a financial emergency: "A consent agreement, mediation, an emergency manager or Chapter 9 bankruptcy," the memo said.

Public Act 72 "does not provide the tools necessary to address the financial crises in Michigan municipalities and school districts," Snyder's office said.

The bill would also give local officials the opportunity to present counter-proposals to an emergency manager's decisions, to request a review by the governor of an emergency manager after one year of state control or to remove an emergency manager after one year with a 2/3 vote of the municipality or school district's governing body.

However, drafts of the legislation appear to continue to allow for the overriding of local officials.

"Following appointment of an emergency manager ... the governing body and the chief administrative officer of the local government shall not exercise any of the powers of those offices except as may be specifically authorized in writing by the emergency manager," said one passage of the bill.

Another passage said emergency managers can prohibit local officials' "access to the local government's office facilities, electronic mail and internal information systems."

Pontiac City Councilman Kermit Williams reacted to the legislation on Thursday.

"Hopefully, the people in Lansing during this lame-duck session will stop trying to shove this law down our throats," he said.

"Many of those legislators have lost (re-election) or have termed out, and yet they're still trying to usurp the votes of 2.3 million people."

If an emergency financial manager is appointed to Detroit, "You'll have 50 percent of the African Americans in the State of Michigan living under emergency management, and I don't know how you get past that point," Williams said.

Pontiac's emergency financial manager said the legislation is needed.

"I don't think the voters really understand how severe and how damaging bankruptcy would be, so I believe the alternative is to have an emergency manager law that is more acceptable than the previous emergency manager law," Schimmel said. "It has to be a law that has enough teeth in it and enough tools in it in order to give emergency managers what (they) need to correct the problem."

The bill "will give the necessary powers to an emergency manager," Schimmel said, and addresses voter concerns by providing for "more communication that takes place between the emergency manager and the mayor and council, and more procedures that would take place before actions were taken."

Emergency financial managers have worked under Public Act 72 of 1990, the previous emergency financial manager law, since Aug. 8. On that day, Public Act 4 was suspended when Proposal 1 was placed on the ballot at the direction of the Michigan Supreme Court, and Michigan's emergency managers were re-appointed in Lansing as emergency financial managers under the older law.

The revival of the older law was the subject of the lawsuit dismissed by Ingham County Circuit Court Judge Rosemary Aquilina on Wednesday.

"The attorney general has long maintained that Public Act 72 is revived and provides authority to emergency financial managers, and this ruling affirms that," said Joy Yearout, spokeswoman for Michigan Attorney General Bill Schuette.

After Aquilina's dismissal of the suit on Wednesday, "we're going to explore our options on appeal," said John Philo, legal director at the Sugar Law Center in Detroit.

The nonprofit law center filed the suit on behalf of the entire Flint City Council, four Benton Harbor city commissioners and two members of the Pontiac City Council, Kermit Williams and Donald Watkins.

The emergency manager legislation announced this week "(does) not address the serious constitutional issues that were raised by Public Act 4; it appears to repeat them," Philo said.

The Local Financial Stability and Choice Act would allow emergency managers to modify or terminate contracts, much as Public Act 4 did, according to the bill's draft language.

Another factor that could affect Michigan's emergency financial managers is a lawsuit filed by Highland Park school board member Robert Davis against Detroit Public Schools Emergency Financial Manager Roy Roberts. It challenges Roberts' legal authority under Public Act 72.

The Michigan Court of Appeals ruled on Nov. 16 that Public Act 72 stands after the repeal of Public Act 4; Davis appealed to the Michigan Supreme Court on Nov. 19, asking for immediate consideration. As of Thursday, the High Court had not yet decided whether to hear the case.

The cities of Allen Park, Benton Harbor, Ecorse, Flint and Pontiac have emergency financial managers, as well as the school districts of Detroit, Highland Park and Muskegon Heights.

FYI

To read a draft of the Local Financial Stability and Choice Act, go to goo.gl/pPtrv.